Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 11, Problem 2RQ
Summary Introduction
To discuss: Whether depreciation affects the level of cash flows from a project in any way if it is not a cash flow expenses.
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Depreciation is a noncash expense: why is it considered when estimating a project net cash flows?
how can depreciation be a cash flow?
Which of the following cash flows should not be considered when evaluating a project?
Changes in working capital
Shipping and installation costs
Sunk costs
Opportunity costs
Externalities
Chapter 11 Solutions
Foundations Of Finance
Ch. 11.A - Prob. 1MCCh. 11.A - Prob. 2MCCh. 11 - Prob. 1RQCh. 11 - Prob. 2RQCh. 11 - If a project requires an additional investment in...Ch. 11 - Prob. 4RQCh. 11 - Prob. 5RQCh. 11 - Prob. 6RQCh. 11 - Prob. 1SPCh. 11 - (Relevant cash flows) Captins Cereal is...
Ch. 11 - Prob. 3SPCh. 11 - Prob. 4SPCh. 11 - Prob. 5SPCh. 11 - Prob. 6SPCh. 11 - Prob. 7SPCh. 11 - Prob. 9SPCh. 11 - Prob. 10SPCh. 11 - Prob. 11SPCh. 11 - Prob. 12SPCh. 11 - Prob. 15SPCh. 11 - (Real options and capital budgeting) You have come...Ch. 11 - (Real options and capital budgeting) Go-Power...Ch. 11 - (Real options and capital budgeting) McDoogals...Ch. 11 - (Risk-adjusted NPV) The Hokie Corporation is...Ch. 11 - (Risk-adjusted discount rates and risk classes)...Ch. 11 - Prob. 1MCCh. 11 - Prob. 2MCCh. 11 - Prob. 3MCCh. 11 - Prob. 7MCCh. 11 - Prob. 8MCCh. 11 - Prob. 9MCCh. 11 - Should the project be accepted? Why or why not?Ch. 11 - Prob. 11MCCh. 11 - Prob. 12MCCh. 11 - Prob. 13MCCh. 11 - Prob. 14MC
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- Why should companies use a project’s cash flows rather thanaccounting income when determining a project’s NPV?arrow_forward(b) Although depreciation is not a cash flow item, it plays an important role in thecalculation of cash flow. Describe the impact of depreciation on a project’s cash flow.arrow_forwardExplain how sunk costs and cannibalisation affect the determination of aninvestment’s incremental cash flows.arrow_forward
- Is after-tax cashflow still the cash inflow even if it is the sum of NOPAT and depreciation in the project?arrow_forwardWhy is Cash Flow affected by depreciation.arrow_forward“Depreciation expenses have no effect on cash flows and, therefore, are not relevant in capitalexpenditure analysis.” Do you agree? Why or why not?arrow_forward
- What would be a business example that shows how depreciation and accelerated depreciation can affect project cash flows?arrow_forwardDemonstrates the difference between depreciation costs as expenses and the cash flow generated by the purchase of a fixed asset? Give an example?arrow_forwardWhich of the following is NOTa relevant cash flow and thus should not be reflected in the analysis of a capital budgeting project? a. Shipping and installation costs. b. Cannibalization effects. c. Opportunity costs. d. Sunk costs that have been expensed for tax purposes. e. Changes in net working capital. Please explain your answer for better understanding.arrow_forward
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